As global temperatures reach record highs, financial centers worldwide are racing to catalyze sustainable investment. Hong Kong and Shanghai, Asia’s premier financial hubs, are uniquely positioned to lead this urgent global transition toward green finance. Their collaboration is both timely and essential, aligning with China’s national climate strategy under the 14th Five-Year Plan (2021-25) and the country’s “dual carbon” goals. By joining forces across key areas — from environmental, social and governance (ESG) reporting to carbon markets — the two cities can accelerate sustainable capital flows, set new benchmarks for Asia, and help drive China’s transition to a low-carbon economy.

A critical foundation for any green finance center is robust, transparent ESG reporting. Alignment between Hong Kong and Shanghai would immediately streamline regulatory compliance, reduce operational barriers, and accelerate capital deployment.

Hong Kong has already taken bold steps by adopting the International Sustainability Standards Board (ISSB) global disclosure framework. Meanwhile, the Chinese mainland introduced trial Corporate Sustainability Disclosure Standards in late 2024, aiming to establish a unified national ESG reporting system by 2030. Shanghai is encouraging listed companies — particularly large State-owned enterprises — to begin publishing ESG reports under the new guidelines starting from the 2025 reporting year, with many top-listed firms expected to comply by April 2026.

Close coordination is crucial to avoid siloed efforts. By harmonizing ESG requirements, the two cities can reduce duplicative compliance burdens for dual-listed companies and create a more seamless disclosure regime. Encouragingly, experts and officials from both markets are already discussing common standards. The next step is action.

One proposal is to establish a joint Hong Kong-Shanghai task force on green finance standards, bringing together regulators, stock exchange officials and industry experts to align taxonomies and reporting guidelines. This body could also work toward mutual recognition of green labels and certifications — so that a green project or bond approved in Hong Kong would be equally recognized in Shanghai, and vice versa. With the central government’s clear support for Hong Kong’s role as a green finance hub, such harmonization would set a benchmark for the entire region.

Hong Kong and Shanghai have both emerged as important hubs for green bonds and other sustainable financial instruments. Closer collaboration could dramatically boost investment flows across borders.

Hong Kong — known for its international capital markets and global investor base — has become a leading regional center for green bond issuance. Shanghai, by contrast, offers enormous scale and a deep pool of domestic capital. By combining Hong Kong’s global connectivity with Shanghai’s economic might, the two cities can mobilize unprecedented financing for renewable energy, clean transportation, and other climate-aligned projects across the country and beyond.

One practical step is enhancing existing cross-border investment channels — especially the Bond Connect program — with a green finance focus. Under a new Collaborative Development Action Plan signed at Shanghai’s Lujiazui Forum in June 2025, the cities committed to “further optimizing” Bond Connect and deepening capital market integration. This opens the door for prioritizing green and sustainable bonds within these mechanisms.

Beyond fixed income, Hong Kong and Shanghai can jointly develop a broader suite of sustainable investment products. These could include green equity indexes and exchange-traded funds, sustainability-linked loans and insurance policies, and specialized transition finance instruments to support the decarbonization of high-emission industries. By codesigning and promoting such offerings, the two markets can better serve diverse investor appetites and funding needs — solidifying their position as leading green finance destinations in Asia.

Carbon markets and emissions trading

China launched the world’s largest carbon emissions trading system in 2021, initially covering the power sector. Shanghai played a key role as one of the earliest pilot cities and is home to the Shanghai Environment and Energy Exchange, which brings years of operational experience in carbon auctions and emissions tracking in the industrial Yangtze River Delta.

Meanwhile, Hong Kong has focused on the voluntary carbon credit market, targeting international investors seeking credible offset mechanisms. In 2022, the Hong Kong Stock Exchange (HKEX) launched Core Climate, a trading platform that facilitates settlement in both Hong Kong dollars and renminbi, bridging global capital with emissions reduction projects in Asia — including the Chinese mainland.

To create a truly global and liquid carbon market, closer coordination between Hong Kong and the mainland (with Shanghai at the forefront) is essential. HKEX has already signed memorandums of understanding with carbon exchanges in multiple cities to promote cross-border trading, settlement, and knowledge exchange. Should China revive its national Certified Emission Reduction program, linking Hong Kong and Shanghai would allow for the development of cross-border carbon trading mechanisms. A pilot program connecting Core Climate and the Shanghai exchange could emulate successful international models — like the EU’s linkage with California and Quebec — enhancing liquidity, transparency, and pricing accuracy.

Fintech innovation in green finance

Financial technology will be a critical enabler for scaling green finance — and here again, Hong Kong and Shanghai are well-positioned to lead. Their 2025 joint action plan promotes collaboration in digital and green finance, with a focus on AI, blockchain, and big data.

One particularly promising area is the tokenization of sustainable assets — such as green bonds and carbon credits — to enable fractional ownership, real-time tracking, and automated trading. Hong Kong’s recent issuance of a tokenized green bond demonstrated blockchain’s ability to support seamless cross-border settlement, offering a blueprint for future collaboration with Shanghai.

Blockchain-based settlement systems could make cross-border trading more efficient, while smart contracts could automate ESG performance-linked transactions. Meanwhile, AI and advanced analytics can strengthen ESG data integrity —processing corporate disclosures, satellite imagery, and other datasets to monitor environmental performance.

Joint regulatory sandboxes, fintech hackathons, and innovation labs could accelerate the development of tools like AI-powered greenwashing detection models or platforms for climate risk disclosure. By innovating together, Hong Kong and Shanghai can ensure the green finance ecosystem is not only robust but also technologically advanced, scalable, and globally competitive.

Talent development and international partnerships

A thriving green finance ecosystem depends on more than markets and technology — it requires people. Both cities must invest in developing talent with cross-disciplinary expertise in climate science, finance, and regulation.

Hong Kong’s Pilot Green and Sustainable Finance Capacity Building Support Scheme helps subsidize training and streamline immigration for green finance professionals. Shanghai, with its academic and financial institutions, can complement these efforts through dedicated programs and research centers.

Joint initiatives — such as internships, exchange programs, and a green finance fellowship — could promote mobility and deepen mutual understanding of each other’s markets. A short-term internship program by 2026 would be an impactful first step.

With their complementary strengths, Hong Kong and Shanghai can jointly elevate the country’s leadership in global green finance. Hong Kong offers access to international investors, a common-law legal framework, and global credibility. Shanghai contributes economic scale, integration with national policy, and deep domestic capital pools

Equally vital are international partnerships. Hong Kong already serves as a conduit for global climate capital and collaborates with institutions like the International Finance Corp and Asian Development Bank. Shanghai can help channel this capital into domestic projects. Both cities are active in global ESG networks, enhancing their visibility and voice on the international stage. Public education, real-world project showcases, and outreach will also be essential in building grassroots support for the green finance transition.

Leading together on the global stage

With their complementary strengths, Hong Kong and Shanghai can jointly elevate the country’s leadership in global green finance. Hong Kong offers access to international investors, a common-law legal framework, and global credibility. Shanghai contributes economic scale, integration with national policy, and deep domestic capital pools.

Their collaboration supports China’s dual-carbon ambitions and climate diplomacy goals. While challenges remain — such as divergent regulatory regimes and market competition — the foundation is solid. Joint initiatives, strong central policy backing, and tangible cooperation agreements are already translating vision into momentum.

If sustained, this partnership could set a global benchmark for aligning finance with climate objectives. From ESG disclosure to carbon markets and fintech innovation, a unified Hong Kong-Shanghai strategy offers the scale, depth, and trust needed to mobilize impactful green finance.

In doing so, the alliance can not only advance China’s environmental goals but also offer global investors credible, high-quality opportunities — establishing a replicable model for financial centers worldwide seeking to harmonize economic and ecological priorities.

The author is director of research at the Institute of Innovative and High-Quality Development (Hong Kong).

The views do not necessarily reflect those of China Daily.